the VOA Special English Economics Report.
week, the government took control of America's two biggest housing finance
companies. Fannie Mae and Freddie Mac are under conservatorship. This process
of supervision will continue until the new Federal Housing Finance Agency
decides they are back in financial health.
Congress gave the Treasury new powers to save them, using as much money as
needed. At first, Treasury Secretary Henry Paulson said he had no plans to use
Sunday he announced that new findings about the condition of the companies
forced action. He said a failure of either would shake financial markets at
home and around the world.
Mae and Freddie Mac buy loans from lenders to provide more money for housing
finance. They own or guarantee five trillion dollars in debt and securities.
They keep some loans but resell others as mortgage-backed securities. These are
held by central banks and other investors worldwide.
housing and credit crisis deepened, Fannie and Freddie have had trouble raising
capital to cover bad loans. The government saw a risk to the financial system.
of the rescue, the Treasury plans to buy at least five billion dollars of their
mortgage-backed securities. And it plans to buy up to one hundred billion
dollars of preferred stock in each company.
Federal Reserve will also lend money as needed.
say taxpayers could lose a lot. But Treasury officials say the plan should save
money in the long term, and might even bring a profit.
company will give the Treasury one billion dollars in stock that pays at least
ten percent a year. And the Treasury could buy up to eighty percent of their
common stock if it chooses. Under the takeover, existing owners of common stock
will lose most of their investment.
interest rates dropped this week following the takeover. Marc Savitt, president
of the National Association of Mortgage Brokers, called it a good sign for the
Fannie Mae and Freddie Mac still face a conflict between serving a public
interest and a private one. Congress created them so more Americans could buy
houses. Then Congress made them into shareholder-owned companies.
people say, nationalize them. Others say, break them up into new companies
without any government support, or sell them to other businesses.
that's the VOA Special English Economics Report, written by Mario Ritter. I'm